[Federal Register Volume 72, Number 35 (Thursday, February 22, 2007)]
[Notices]
[Pages 8046-8050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-2910]



[[Page 8046]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55294; File No. SR-NYSEArca-2007-05]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Accelerated Approval of Proposed Rule Change and Notice of Filing and 
Order Granting Accelerated Approval to Amendment No. 1 Regarding a 
Proposed Combination Between NYSE Group, Inc. and Euronext N.V.

February 14, 2007.

I. Introduction

    On January 12, 2007, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934, as amended, (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change regarding the proposed business 
combination (``Combination'') between NYSE Group, Inc. (``NYSE Group'') 
and Euronext N.V. (``Euronext''). The proposed rule change was 
published for comment in the Federal Register on January 19, 2007.\3\ 
The Commission received no comments on the proposal. On February 13, 
2007, the Exchange filed Amendment No. 1 to the proposed rule 
change.\4\ This order grants accelerated approval to the proposed rule 
change, grants accelerated approval to Amendment No. 1, and solicits 
comments from interested persons on Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55109 (January 16, 
2007), 72 FR 2578 (``Notice'').
    \4\ See Partial Amendment dated February 13, 2007 (``Amendment 
No. 1''). The text of Amendment No. 1 and Exhibits 5C, 5D, 5G, and 
5H, which set forth certain governing documents as proposed to be 
amended, are available on the Commission's Web site (http://www.sec.gov/rules/sro.shtml), at the Commission's Public Reference 
Room, at the Exchange, and on the Exchange's Web site (http://www.nysearca.com).
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    The Commission has reviewed carefully the proposed rule change and 
finds that the proposed rule change is consistent with the requirements 
of the Exchange Act and the rules and regulations thereunder applicable 
to a national securities exchange.\5\ In particular, the Commission 
finds that the proposed rule change is consistent with Section 6(b) of 
the Exchange Act,\6\ which, among other things, requires a national 
securities exchange to be so organized and have the capacity to be able 
to carry out the purposes of the Exchange Act and to enforce compliance 
by its members and persons associated with its members with the 
provisions of the Exchange Act, the rules and regulations thereunder, 
and the rules of the exchange, and assure the fair representation of 
its members in the selection of its directors and administration of its 
affairs, and provide that one or more directors shall be representative 
of issuers and investors and not be associated with a member of the 
exchange, broker, or dealer. Section 6(b) of the Exchange Act \7\ also 
requires that the rules of the exchange be designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \5\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b).
    \7\ Id.
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    The Commission finds good cause for approving this proposed rule 
change before the thirtieth day after the publication of notice thereof 
in the Federal Register. This proposed rule change seeks to make 
changes to the following documents: The Amended and Restated 
Certificate of Incorporation of NYSE Euronext (``NYSE Euronext 
Certificate of Incorporation''); the Amended and Restated Bylaws of 
NYSE Euronext (``NYSE Euronext Bylaws''); the NYSE Euronext Director, 
Independence Policy (``Independence Policy''), which policy will 
replace the current NYSE Group Director Independence Policy; the 
proposed Amended and Restated Certificate of Incorporation of NYSE 
Group (``NYSE Group Certificate of Incorporation''); the proposed 
Amended and Restated Bylaws of NYSE Group (``NYSE Group Bylaws''); the 
resolutions of the board of directors of NYSE Group; and the proposed 
Trust Agreement for the Delaware Trust (``Trust Agreement''). All of 
the proposed changes to these documents were published for comment in 
connection with the proposed rule change submitted by the New York 
Stock Exchange LLC (``NYSE LLC'') in connection with the 
Combination.\8\ In addition to these changes, the Exchange has proposed 
changes to the proposed Amended and Restated Certificate of 
Incorporation of Archipelago Holdings, Inc. (``Arca Holdings'') to 
allow for the ownership and voting of shares of Arca Holdings by the 
Delaware Trust (``Trust'').\9\ The Commission has received no comment 
letters on this proposal. The Commission finds good cause to accelerate 
approval of this proposal to allow the timing of this approval to 
coincide with the approval of the corresponding filing by the NYSE 
LLC.\10\
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    \8\ See Securities Exchange Act Release No. 55026 (December 29, 
2006), 72 FR 814 (January 8, 2007) (``NYSE LLC Rule Filing'').
    \9\ Similar changes have been proposed for NYSE Group. See 
proposed NYSE Group Certificate of Incorporation, Article IV, 
Section 4.
    \10\ See Securities Exchange Act Release No. 55293 (February 14, 
2007) (approval order for SR-NYSE-2006-120 (``NYSE LLC Approval 
Order'')).
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A. Accelerated Approval of Amendment No. 1

    The Commission also finds good cause for approving Amendment No. 1 
prior to the thirtieth day after publishing notice of Amendment No. 1 
in the Federal Register pursuant to Section 19(b)(2) of the Exchange 
Act.\11\ In Amendment No. 1, the Exchange made technical revisions to 
proposed Article VII, Section 2 of the proposed NYSE Group Certificate 
of Incorporation relating to quorum requirements for each meeting of 
stockholders.\12\ These changes are necessary to clarify the proposal. 
The Commission finds good cause to accelerate approval of these changes 
prior to the thirtieth day after publication in the Federal Register 
because they clarify the Exchange's rules, which should facilitate the 
Exchange's compliance with its rules, and the Commission's ability to 
ensure compliance with such rules, and assist members and investors in 
understanding the application and scope of the rules.
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    \11\ 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2) of the 
Exchange Act, the Commission may not approve any proposed rule 
change, or amendment thereto, prior to the thirtieth day after the 
date of publication of the notice thereof, unless the Commission 
finds good cause for so doing.
    \12\ In the Notice, the Exchange mistakenly showed proposed 
deletions to the current quorum requirements. The Exchange is not 
proposing to change the quorum requirements that exist in the 
current NYSE Group Certificate of Incorporation.
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    In addition, the Exchange made certain clarifying, conforming, 
technical, non-material, and non-substantive changes to the proposed 
Amended and Restated Certificate of Incorporation of Arca Holdings 
(``Arca Holdings Certificate of Incorporation''), the proposed NYSE 
Group Certificate of Incorporation, the Independence Policy, and the 
proposed Trust Agreement, which raise no new or novel issues. These 
changes are non-substantive and technical in nature and are necessary 
to reflect the changes from the current rules of the Exchange and 
clarify the proposal. The Commission finds good cause exists to 
accelerate approval of these changes prior to the thirtieth day

[[Page 8047]]

after publication in the Federal Register because they clarify the 
Exchange's rules, which should facilitate the Exchange's compliance 
with its rules, the Commission's ability to ensure compliance with such 
rules, and assist members and investors in understanding the 
application and scope of the rules.
    The Commission finds that the changes proposed in Amendment No. 1 
are consistent with the Exchange Act and therefore finds good cause to 
accelerate approval of Amendment No. 1, pursuant to Section 19(b)(2) of 
the Exchange Act.\13\
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    \13\ 15 U.S.C. 78s(b)(2).
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B. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether Amendment No. 1 
is consistent with the Exchange Act. Comments may be submitted by any 
of the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#3f4d4a535a125c5052525a514b4c7f4c5a5c11585049"><span class="__cf_email__" data-cfemail="4b393e272e66282426262e253f380b382e28652c243d">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2007-05 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-05. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro-shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
Amendment No. 1 of File Number SR-NYSEArca-2007-05 and should be 
submitted on or before March 15, 2007.

II. Discussion

    The Exchange has submitted the proposed rule change in connection 
with the Combination of NYSE Group with Euronext. As a result of the 
Combination, the businesses of NYSE Group (including the businesses of 
the Exchange and NYSE LLC (a New York limited liability company, 
registered national securities exchange and self-regulatory 
organization)), and Euronext will be held under a single, publicly 
traded holding company named NYSE Euronext, a Delaware corporation 
(``NYSE Euronext''). Following the Combination, each of NYSE Group and 
Euronext will be a separate subsidiary of NYSE Euronext, and their 
respective businesses and assets will continue to be held as they are 
currently held (subject to any post-closing corporate reorganization of 
Euronext). The proposed rule change is necessary to effectuate the 
consummation of the Combination and will not be operative until the 
consummation of the Combination.

A. Corporate Structure

    After the Combination, Arca Holdings, a Delaware corporation, will 
remain a wholly owned subsidiary of NYSE Group. NYSE Arca Holdings, 
Inc., a Delaware corporation (``NYSE Arca Holdings''), and NYSE Arca 
L.L.C., a Delaware limited liability company (``NYSE Arca LLC''), will 
remain wholly owned subsidiaries of Arca Holdings. NYSE Arca will 
remain a wholly owned subsidiary of NYSE Arca Holdings, and NYSE Arca 
Equities, Inc. (``NYSE Arca Equities''), a Delaware corporation 
formerly known as PCX Equities, Inc., will remain a wholly owned 
subsidiary of NYSE Arca. NYSE Arca will continue to maintain its status 
as a registered national securities exchange and self-regulatory 
organization. Arca Holdings' businesses and assets will continue to be 
held by it and its subsidiaries. NYSE LLC will remain a wholly owned 
subsidiary of NYSE Group. NYSE Market, Inc. (``NYSE Market''), a 
Delaware corporation, and NYSE Regulation, Inc. (``NYSE Regulation''), 
a New York Type A not-for-profit corporation, will remain wholly owned 
subsidiaries of NYSE LLC.\14\
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    \14\ For a description of the Combination and related rule 
changes regarding NYSE Euronext, NYSE Group, and the Trust, see the 
NYSE LLC Approval Order, supra note 10. See also NYSE LLC Rule 
Filing, supra note 8. The Combination involves certain modifications 
to the organizational documents of NYSE Group and of NYSE Euronext, 
which upon consummation of the Combination will be the new indirect 
parent company of NYSE LLC and of the Exchange. Provisions of the 
organizational documents of NYSE Group and NYSE Euronext and the 
Trust Agreement constitute rules of NYSE LLC and of the Exchange. 
The resolutions of the board of directors of NYSE Group are also 
rules of NYSE LLC and of the Exchange requiring Commission approval. 
Accordingly, NYSE LLC and the Exchange have each submitted proposed 
rule changes to reflect the rule changes to be implemented in 
connection with the Combination.
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    The Exchange represents that the Combination will also have no 
effect on the ability of any party to trade securities on NYSE Arca, 
NYSE Arca Equities, or NYSE Market. Euronext and its subsidiaries will 
continue to operate their business and operations in substantially the 
same manner as they are conducted currently, with any changes subject 
to the approval of the European Regulators to the extent required.
1. NYSE Euronext
    Following the Combination, NYSE Euronext will be a for-profit, 
publicly traded stock corporation and will act as a holding company for 
the businesses of NYSE Group and Euronext. NYSE Euronext will own all 
of the equity interests in NYSE Group and its subsidiaries, including 
the Exchange and NYSE Arca, and a majority (if not all) of the equity 
interests in Euronext and its respective subsidiaries. Section 19(b) of 
the Exchange Act and rule 19b-4 thereunder require a self-regulatory 
organization (``SRO'') to file proposed rule changes with the 
Commission. Although NYSE Euronext is not an SRO, certain provisions of 
the NYSE Euronext Certificate of Incorporation and NYSE Euronext Bylaws 
are rules of an exchange \15\ if they are stated policies, practice, or 
interpretations, as defined in rule 19b-4 under the Exchange Act,

[[Page 8048]]

of the exchange, and must be filed with the Commission pursuant to 
section 19(b)(4) of the Exchange Act and rule 19b-4 thereunder. 
Accordingly, the Exchange has filed the NYSE Euronext Certificate of 
Incorporation and NYSE Euronext Bylaws with the Commission.
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    \15\ See section 3(a)(27) of the Exchange Act, 15 U.S.C. 
78c(a)(27). If NYSE Euronext decides to change its Amended and 
Restated Certificate of Incorporation or Amended and Restated 
Bylaws, NYSE Euronext must submit such change to the board of 
directors of NYSE LLC, NYSE Market, NYSE Regulation, NYSE Arca, and 
NYSE Arca Equities, and if any or all of such board of directors 
shall determine that such amendment or repeal must be filed with or 
filed with and approved by the Commission pursuant to section 19 of 
the Exchange Act and the rules thereunder, such change shall not be 
effective until filed with or filed with and approved by the 
Commission, as applicable. See proposed NYSE Euronext Certificate of 
Incorporation, Article X and proposed NYSE Euronext Bylaws, Article 
X, section 10.10(C).
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a. Board of Directors
    It is currently contemplated that immediately after the 
Combination, the NYSE Euronext board of directors will consist of 
twenty-two directors.\16\ Each member of the NYSE Euronext board of 
directors (other than the chief executive officer and deputy chief 
executive officer of NYSE Euronext if they are members of the board of 
directors) must satisfy the independence requirements set forth in the 
Independence Policy, as amended from time to time. This Independence 
Policy, however, is not referenced in the organizational documents of 
the Exchange or NYSE Arca Equities,\17\ and is therefore not relevant 
to the Commission's consideration of whether the boards of directors of 
the Exchange or NYSE Arca Equities are consistent with the Exchange 
Act.
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    \16\ For a detailed description of the provisions regarding the 
composition of, and the selection process for, the NYSE Euronext 
board of directors, see NYSE LLC Approval Order, supra note 10.
    \17\ The organizational documents of the Exchange and NYSE Arca 
Equities (unlike the organizational documents of NYSE LLC, NYSE 
Market and NYSE Regulation) do not require that any of the members 
of the board of directors of the Exchange and NYSE Arca Equities be 
members of the board of directors of NYSE Euronext. See Bylaws of 
NYSE Arca, Article III, Section 3.02, and Bylaws of NYSE Arca 
Equities, Article III, Section 3.02.
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b. Voting and Ownership Limitations; Changes in Control of the Exchange
    The NYSE Euronext Certificate of Incorporation includes 
restrictions on the ability to vote and own shares of stock of NYSE 
Euronext.\18\ Members that trade on an exchange traditionally have 
ownership interests in such exchange. As the Commission has noted in 
the past, however, a member's interest in an exchange could become so 
large as to cast doubt on whether the exchange can fairly and 
objectively exercise its self-regulatory responsibilities with respect 
to that member.\19\ A member that is a controlling shareholder of an 
exchange might be tempted to exercise that controlling influence by 
directing the exchange to refrain from, or the exchange may hesitate 
to, diligently monitor and surveil the member's conduct or diligently 
enforce its rules and the federal securities laws with respect to 
conduct by the member that violates such provisions.
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    \18\ See NYSE LLC Approval Order, supra note 10, for a detailed 
description of the provisions regarding restrictions on the ability 
to vote and own shares of stock of NYSE Euronext.
    \19\ See Securities Exchange Act Release Nos. 53382 (February 
27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order 
approving merger of New York Stock Exchange, Inc. and Archipelago, 
and demutualization of New York Stock Exchange, Inc. (``NYSE Inc.-
Archipelago Merger Order'')); 53128 (January 13, 2006), 71 FR 3550 
(January 23, 2006) (File No. 10-131); 51149 (February 8, 2005), 70 
FR 7531 (February 14, 2005) (SR-CHX-2004-26); 49718 (May 17, 2004), 
69 FR 29611 (May 24, 2004) (SR-PCX-2004-08); 49098 (January 16, 
2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-2003-73); and 49067 
(January 13, 2004), 69 FR 2761 (January 20, 2004) (SR-BSE-2003-19).
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    The Commission finds the ownership and voting restrictions in the 
NYSE Euronext Certificate of Incorporation are consistent with the 
Exchange Act. These requirements should minimize the potential that a 
person could improperly interfere with or restrict the ability of the 
Commission, the Exchange, or its subsidiaries to effectively carry out 
their regulatory oversight responsibilities under the Exchange Act.
2. NYSE Group
    Following the Combination, NYSE Group will merge with a wholly 
owned subsidiary of NYSE Euronext and the surviving corporation will be 
a wholly owned subsidiary of NYSE Euronext. Section 19(b) of the 
Exchange Act and Rule 19b-4 thereunder require an SRO to file proposed 
rule changes with the Commission. Although NYSE Group is not an SRO, 
certain provisions of its Amended and Restated Certificate of 
Incorporation and Amended and Restated Bylaws are rules of an exchange 
\20\ if they are stated policies, practices, or interpretations, as 
defined in Rule 19b-4 of the Exchange Act, of the exchange, and must be 
filed with the Commission pursuant to Section 19(b)(4) of the Exchange 
Act and Rule 19b-4 thereunder. Accordingly, the Exchange has filed the 
proposed NYSE Group Certificate of Incorporation and proposed NYSE 
Group Bylaws with the Commission.
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    \20\ See Section 3(a)(27) of the Exchange Act, 15 U.S.C. 
78c(a)(27). If NYSE Group decides to change its Amended and Restated 
Certificate of Incorporation or Amended and Restated Bylaws, NYSE 
Group must submit such change to the board of directors of NYSE LLC, 
NYSE Market, NYSE Regulation, NYSE Arca, and NYSE Arca Equities, and 
if any or all of such board of directors shall determine that such 
amendment or repeal is required by law or regulation to be filed 
with or filed with and approved by the Commission pursuant to 
Section 19 of the Exchange Act and the rules thereunder, such change 
shall not be effective until filed with or filed with and approved 
by the Commission, as applicable. See proposed NYSE Group 
Certificate of Incorporation, Article XII and proposed Amended and 
Restated Bylaws of NYSE Group (``NYSE Group Bylaws''), Article VII, 
Section 7.9(b).
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    The Exchange has proposed to change the voting and ownership 
limitations of NYSE Group to include a statement that such limitations 
will not be applicable so long as NYSE Euronext and the Trust 
collectively own all of the capital stock of NYSE Group. Instead, while 
NYSE Group is a wholly owned subsidiary of NYSE Euronext, or as 
provided for in the Trust Agreement, there shall be no transfer of the 
shares of NYSE Group held by NYSE Euronext without the approval of the 
Commission.\21\ If NYSE Group ceases to be wholly owned by NYSE 
Euronext or the Trust, the current voting and ownership limitations 
will apply.\22\
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    \21\ See proposed NYSE Group Certificate of Incorporation, 
Article IV, Section 4(a).
    \22\ See proposed NYSE Group Certificate of Incorporation, 
Article IV, Section 4(b).
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    The Commission finds the changes to the ownership and voting 
restrictions in the proposed NYSE Group Certificate of Incorporation 
are consistent with the Exchange Act. These requirements should 
minimize the potential that a person could improperly interfere with or 
restrict the ability of the Commission or the ability of the Exchange, 
NYSE Market, NYSE Regulation, NYSE Arca LLC, NYSE Arca, and NYSE Arca 
Equities (together, the ``U.S. Regulated Subsidiaries'') to effectively 
carry out their regulatory oversight responsibilities under the 
Exchange Act.
    The Exchange requested that the Commission allow NYSE Euronext to 
wholly own and vote all of the outstanding common stock of NYSE 
Group.\23\ The Commission believes it is consistent with the Exchange 
Act to allow NYSE Euronext to wholly own and vote all of the 
outstanding common stock of NYSE Group.\24\ The Commission notes that 
NYSE Euronext represents that neither NYSE Euronext nor any of its 
related persons is subject to any statutory disqualification (as 
defined in Section 3(a)(39) of the Exchange Act), or is an ETP Holder 
of NYSE Arca Equities, OTP Holder or OTP Firm of NYSE Arca or member or 
member organization of NYSE LLC. Moreover, NYSE Euronext has comparable 
voting and ownership limitations to NYSE Group. NYSE Euronext has also 
included in its corporate documents certain provisions designed to 
maintain the independence of the U.S. Regulated Subsidiaries' self-

[[Page 8049]]

regulatory functions from NYSE Euronext and NYSE Group. Accordingly, 
the Commission believes that the acquisition of ownership and exercise 
of voting rights of NYSE Group common stock by NYSE Euronext will not 
impair the ability of the Commission or any of the U.S. Regulated 
Subsidiaries to discharge their respective responsibilities under the 
Exchange Act.
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    \23\ The Exchanged clarified in Amendment No. 1 that NYSE 
Euronext alone be permitted to wholly own and vote such shares. See 
Amendment No. 1 supra note 4.
    \24\ See NYSE LLC Approval Order, supra note 10, for a 
description of the proposal that NYSE Euronext wholly own and vote 
all of the outstanding stock of NYSE Group upon the consummation of 
the Combination.
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3. The Exchange and NYSE Arca Equities
    Following the Combination, NYSE Arca, which is registered as a 
national securities exchange and is an SRO, will remain a wholly owned 
subsidiary of NYSE Arca Holdings, and NYSE Arca Equities will remain a 
wholly owned subsidiary of NYSE Arca. The Combination will have no 
effect on the ability of any party to trade securities on NYSE Arca or 
NYSE Arca Equities. Pursuant to a regulatory services agreement, NYSE 
Regulation will continue to perform many of the regulatory functions of 
NYSE Arca.
    There will be no change to the current manner of election or 
appointment of the directors and officers of Arca Holdings, NYSE Arca 
Holdings, NYSE Arca LLC, NYSE Arca, or NYSE Arca Equities as a result 
of the Combination.
    Article Fourth of the proposed Arca Holdings Certificate of 
Incorporation will be amended to provide for voting or ownership of the 
shares of stock of Arca Holdings by the Trust pursuant to the terms and 
conditions of the Trust Agreement by and among NYSE Euronext, Inc., 
NYSE Group, Inc. and the trustees and Delaware trustee thereto.\25\ The 
Commission finds that these changes to the ownership and voting 
restrictions in the proposed Arca Holdings Certificate of Incorporation 
are consistent with the Exchange Act. These requirements should 
minimize the potential that a person could improperly interfere with or 
restrict the ability of the Commission or the U.S. Regulated 
Subsidiaries to effectively carry out their regulatory oversight 
responsibilities under the Exchange Act.
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    \25\ See proposed Arca Holdings Certificate of Incorporation, 
Article Fourth (C)(1) and (D)(1).
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B. Relationship of NYSE Euronext, NYSE Group, and the U.S. Regulated 
Subsidiaries; Jurisdiction Over NYSE Euronext

    Although NYSE Euronext itself will not carry out regulatory 
functions, its activities with respect to the operation of any of the 
U.S. Regulated Subsidiaries must be consistent with, and not interfere 
with, the U.S. Regulated Subsidiaries' self-regulatory obligations. The 
NYSE Euronext corporate documents include certain provisions that are 
designed to maintain the independence of the U.S. Regulated 
Subsidiaries' self-regulatory functions from NYSE Euronext and NYSE 
Group, enable the U.S. Regulated Subsidiaries to operate in a manner 
that complies with the federal securities laws, including the 
objectives of Sections 6(b) and 19(g) of the Exchange Act,\26\ and 
facilitate the ability of the U.S. Regulated Subsidiaries and the 
Commission to fulfill their regulatory and oversight obligations under 
the Exchange Act.\27\
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    \26\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
    \27\ See NYSE LLC Approval Order, Section II.B., supra note 10, 
for a detailed discussion of proposed provisions in the NYSE 
Euronext Bylaws regarding NYSE Euronext compliance with U.S. federal 
securities laws; NYSE Euronext books and records; jurisdiction of 
the U.S. federal courts and the Commission; confidential information 
pertaining to self-regulation; and responsibilities of NYSE Euronext 
directors with respect to the ability of U.S. Regulated 
Subsidiaries, NYSE Euronext, and NYSE Group to carry out their 
responsibilities under the Exchange Act, including referring rule 
violations and providing funding to NYSE Regulation.
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    The Commission finds that the provisions proposed by the Exchange 
are consistent with the Exchange Act, and that they will assist the 
Exchange in fulfilling its self-regulatory obligations and in 
administering and complying with the requirements of the Exchange Act. 
With respect to the maintenance of books and records of NYSE Euronext, 
the Commission notes that while NYSE Euronext has the discretion to 
maintain books and records that relate to both the U.S. Regulated 
Subsidiaries and the European Market Subsidiaries (each such book and 
record, an ``Overlapping Record'') in either the United States or the 
home jurisdiction of one or more of the European Market Subsidiaries, 
NYSE Euronext has represented to the Commission that it will maintain 
in the United States originals or copies of Overlapping Records covered 
by Rule 17a-1(b) under the Exchange Act \28\ promptly after creation of 
such Overlapping Records.\29\ The Commission believes that such actions 
by NYSE Euronext with respect to its books and records are necessary to 
ensure that the U.S. Regulated Subsidiaries comply with the 
requirements of Section 17 of the Exchange Act \30\ and Rule 17a-1(b) 
thereunder.
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    \28\ 17 CFR 240.17a-1(b).
    \29\ See NYSE LLC Rule Filing, supra note 8, at 822.
    \30\ 15 U.S.C. 78q.
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    Under Section 20(a) of the Exchange Act,\31\ any person with a 
controlling interest in NYSE LLC or NYSE Arca shall be jointly and 
severally liable with and to the same extent that NYSE LLC and NYSE 
Arca are liable under any provision of the Exchange Act, unless the 
controlling person acted in good faith and did not directly or 
indirectly induce the act or acts constituting the violation or cause 
of action. In addition, Section 20(e) of the Exchange Act \32\ creates 
aiding and abetting liability for any person who knowingly provides 
substantial assistance to another person in violation of any provision 
of the Act or rules thereunder. Further, Section 21C of the Exchange 
Act \33\ authorizes the Commission to enter a cease-and-desist order 
against any person who has been ``a cause of'' a violation of any 
provision of the Exchange Act through an act or omission that the 
person knew or should have known would contribute to the violation. 
These provisions are applicable to NYSE Euronext's and NYSE Group's 
dealings with the U.S. Regulated Subsidiaries.
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    \31\ 15 U.S.C. 78t(a).
    \32\ 15 U.S.C. 78t(e).
    \33\ 15 U.S.C. 78u-3.
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C. Trust

    NYSE Euronext will operate several regulated entities located in 
the United States and in various jurisdictions in Europe. In connection 
with obtaining regulatory approval of the Combination, NYSE Euronext 
proposed to implement two standby structures, one involving a Delaware 
trust and one involving a Dutch foundation (``Dutch Foundation'').\34\ 
Pursuant to the terms of the Trust Agreement,\35\ the Trust will be 
empowered to take actions to mitigate the effects of any material 
adverse change in European law that has an ``extraterritorial'' impact 
on the non-European issuers listed on NYSE Group securities exchanges, 
non-European financial services firms that are members of any NYSE 
Group securities exchange, or any NYSE Group securities exchange.
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    \34\ See NYSE LLC Approval Order, supra note 10, for a detailed 
discussion of the Delaware Trust and Dutch Foundation.
    \35\ See proposed Trust Agreement, by and among NYSE Euronext, 
NYSE Group, the Delaware trustee and the trustees, attached as 
Exhibit H to Amendment No. 1.
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    Upon the occurrence of a material adverse change of law that 
continues after the designated cure periods, the Trust may exercise 
certain remedies that result in a total or partial loss by NYSE 
Euronext of operating control over some of its securities exchanges. 
The Trust may require that NYSE Euronext transfer control over a 
substantial portion of its business and assets to the direction of the 
Trust. As a result,

[[Page 8050]]

control of NYSE Group of any NYSE Group securities exchange may be 
assumed by the Trust. As discussed above, Section 19(b) of the Exchange 
Act and Rule 19b-4 thereunder require an SRO to file a proposed rule 
change with the Commission. Although the Trust is not an SRO, certain 
provisions of the Trust Agreement are rules of an exchange \36\ if they 
are stated policies, practices, or interpretations, as defined in Rule 
19b-4 under the Exchange Act,\37\ of the exchange, and must be filed 
with the Commission pursuant to Section 19(b)(4) of the Exchange Act 
\38\ and Rule 19b-4 thereunder. Accordingly, the Exchange has filed the 
Trust Agreement with the Commission.
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    \36\ See Section 3(a)(27) of the Exchange Act, 15 U.S.C. 
78c(a)(27).
    \37\ 17 CFR 240.19b-4.
    \38\ 15 U.S.C. 78s(b).
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    The Trust Agreement contains detailed provisions with respect to 
governance of the Trust; remedies that may be exercised by trustees 
upon the occurrence of a material adverse change in law; the 
relationship of the Trust, NYSE Group, and the U.S. Regulated 
Subsidiaries; and jurisdiction over the Trust.\39\ The Commission finds 
that the Trust Agreement's provisions are designed to enable the U.S. 
Regulated Subsidiaries to operate in a manner that complies with the 
federal securities laws, including the objectives and requirements of 
Sections 6(b) and 19(g) of the Exchange Act,\40\ and to facilitate the 
ability of the U.S. Regulated Subsidiaries and the Commission to 
fulfill their regulatory and oversight obligations under the Exchange 
Act,\41\ and are consistent with the provisions other entities that 
directly or indirectly own or control an SRO have instituted and that 
have been approved by the Commission.\42\ The Commission finds that the 
Trust's provisions are consistent with the Exchange Act, and that they 
are intended to assist the Exchange in fulfilling its self-regulatory 
obligations and in administering and complying with the requirements of 
the Exchange Act.
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    \39\ See NYSE LLC Approval Order, Sections II.C and II.D, supra 
note 10, for a detailed description of the provisions contained in 
the Trust Agreement.
    \40\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
    \41\ See Trust Agreement, Articles V, VI, and VIII.
    \42\ See, e.g., NYSE Inc.-Archipelago Merger Order, supra note 
19.
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    Under Section 20(a) of the Exchange Act,\43\ any person with a 
controlling interest in NYSE LLC and NYSE Arca shall be jointly and 
severally liable with and to the same extent that NYSE LLC and NYSE 
Arca are liable under any provision of the Exchange Act, unless the 
controlling person acted in good faith and did not directly or 
indirectly induce the act or acts constituting the violation or cause 
of action. In addition, Section 20(e) of the Exchange Act \44\ creates 
aiding and abetting liability for any person who knowingly provides 
substantial assistance to another person in violation of any provision 
of the Exchange Act or rule thereunder. Further, Section 21C of the 
Exchange Act \45\ authorizes the Commission to enter a cease-and-desist 
order against any person who has been ``a cause of'' a violation of any 
provision of the Exchange Act through an act or omission that the 
person knew or should have known would contribute to the violation. 
These provisions are applicable to the Trust and all other entities 
controlling the U.S. Regulated Subsidiaries.
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    \43\ 15 U.S.C. 78t(a).
    \44\ 15 U.S.C. 78t(e).
    \45\ 15 U.S.C. 78u-3.
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D. Automatic Suspension and Repeal of Certain Provisions in the NYSE 
Euronext Organizational Documents

    Under the organizational documents of NYSE Euronext, immediately 
following the exercise of a call option over a substantial portion of 
Euronext's business (a ``Euronext call option''), whereby the priority 
shares or ordinary shares of Euronext are transferred from NYSE 
Euronext to the Dutch Foundation, and for so long as the Dutch 
Foundation shall continue to hold any priority shares or ordinary 
shares of Euronext, or the voting securities of one or more of the 
subsidiaries of Euronext that, taken together, represent a substantial 
portion of Euronext's business, then certain provisions of the NYSE 
Euronext Bylaws shall be suspended.\46\
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    \46\ These include the requirement that European Persons are 
represented in a certain proportion on the NYSE Euronext board of 
directors and the nominating and governance committee of the NYSE 
Euronext board of directors; the requirement of supermajority board 
or shareholder approval for certain extraordinary transactions; the 
provisions granting jurisdiction to European regulators over certain 
actions of NYSE Euronext and the NYSE Euronext board of directors; 
and references to European regulators, European market subsidiaries 
and European disqualified persons appearing in the NYSE Euronext 
Bylaws.
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    In addition, if after a period of six months following the exercise 
of a Euronext call option, the Dutch Foundation shall continue to hold 
any ordinary or priority shares of Euronext or any ordinary or priority 
shares or similar voting securities of one or more subsidiaries of 
Euronext that, taken together, represent a substantial portion of 
Euronext's business, or if at any time, NYSE Euronext no longer holds a 
direct or indirect controlling interest in Euronext or in one or more 
subsidiaries of Euronext that, taken together, represent a substantial 
portion of Euronext's business, then certain provisions of the NYSE 
Euronext Bylaws and the NYSE Euronext Certificate of Incorporation 
shall be revoked.\47\ In addition, any officer or director of NYSE 
Euronext who is a European Person shall resign or be removed from his 
or her office.
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    \47\ These include the provisions of the NYSE Euronext Bylaws 
subject to suspension; the references in the NYSE Euronext 
Certificate of Incorporation and NYSE Euronext Bylaws to European 
regulators, European exchange regulations, European market 
subsidiaries, European regulated markets, Europe and European 
disqualified persons; the provisions in the NYSE Euronext 
Certificate of Incorporation and NYSE Euronext Bylaws requiring that 
amendments to such certificate of incorporation or bylaws be 
submitted to the European market subsidiaries and, if applicable, 
filed with and approved by a European regulator; and the provisions 
in the NYSE Euronext Bylaws requiring approval of either two-thirds 
or more of the NYSE Euronext directors or 80% of the votes entitled 
to be cast by the holders of the then-outstanding shares of capital 
stock of NYSE Euronext entitled to vote generally in the election of 
directors to amend certain bylaw provisions.
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    The Commission finds the suspension or repeal of the above 
described provisions of the NYSE Euronext Bylaws and the NYSE Euronext 
Certificate of Incorporation under circumstances in which the Dutch 
Foundation controls a substantial portion of Euronext's business, is 
consistent with the Exchange Act.

III. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Exchange Act and the rules and 
regulations thereunder applicable to a national securities exchange.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act \48\ that the proposed rule change (SR-NYSEArca-2007-05), 
as amended by Amendment No. 1, is approved on an accelerated basis.
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    \48\ 15 U.S.C. 78s(b)(2).

    By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E7-2910 Filed 2-21-07; 8:45 am]
BILLING CODE 8011-01-P


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